Debt-Reduction on Hold: Time to Batten Down the Hatches

Lesson #1: No “auto pilot” in $ management

One of the big lessons I’ve learned so far in our journey out of debt is that you can’t go into auto-pilot with your money management. I was talking about this yesterday with MT, a math teacher at my high school who is trying to get out of debt too. The financial variations that happen from month to month are highly irritating to people like us. Our long-established modus operendi has been auto-pilot – cruising along with no intentional focus on money logistics – and we’re still drawn to it. There’s a relentless consciousness that’s required. People long-accustomed to going with the flow, taking it as it comes, because “it will all come out in the wash” find this constant need to be on top of things wearing. Eventually, I’m hoping it will become second nature. But it hasn’t yet.

People like MT and his wife have a regular income to work with. DH and I don’t. His home business varies a lot, with the fall and early winter months being the highest, and the spring months being the lowest. Even within those trends, there are unexpected twists. Last November, for instance, was surprisingly low. And March was surprisingly high. At the end of March, DH and I were so happy to put down a big payment against our business debt. It brought the beast, which had sat at $80,800 in December of 2012, down to 4-figures – to $9,500.

Lesson #2: Keep finances measured and buffered

I reported in my post “March Triumph” that as we maxed out on our debt payment to reach this milestone, I asked DH, “’Do you think we should wait to see how April pans out?’ He thought for a whole second. ‘No,’ was the answer.” There’s another lesson I’ve learned: It’s good to maintain a measured, buffered state in your personal finances – even if it seems to fly in the face of admirable efforts like paying off a big chunk of debt. But again, that measured discipline is SO hard. For people who used to be comfortable making extreme purchases and going into extreme debt, it’s easier to make extreme debt repayments when the going is good than it is to be moderate.

Lesson #3: Don’t set your heart on a promising outcome

In our excitement about approaching the end of our business debt, DH and I started to plan renovations to accommodate the greater space he needs for his home business. In my post on the topic a few weeks ago, I wrote “Soon – almost certainly by the end of July – we won’t have a business debt to pay down anymore.” There’s a third lesson I’ve learned: Don’t set your heart on a promising financial outcome. Even more importantly don’t start planning and acting as if it’s definite. There are no guarantees. I tend to be as swayed by hope as I am by disappointment.

“If”

In his poem “If”, Rudyard Kipling urges his reader not to be swayed by events: “If you can meet with Triumph and Disaster / And treat those two impostors just the same . . .” Kipling wrote the poem for his only son John, and the message at the end of it is that “if” he can manage to adopt all of the wisdom imparted, “you’ll be a Man my son!” (With capital M and exclamation mark included.) Well, I will never be a Man, but “if” I can manage to adopt these three lessons so that they become second nature to me, perhaps I will be Financially Wise. !

So March was a “Triumph” (Kipling liked his capital letters) – but as it turns out, my cautionary question was one we should have paid more attention to. I just looked back at that post again: “In my ongoing efforts not to give way to emotion or impulse in money matters, I asked, ‘Do you think we should wait to see how April pans out?'” But even as I asked the question, I knew we’d go for the big payment. I was just giving lip service to what I knew was wisdom.

Possible strike action for me

We’ve always looked upon the “variable” part of our income as DH’s, but now, it’s my income that’s rocking the boat. It’s no secret that there are strikes in a growing number of boards of education in our part of the world. And it’s no secret that there is a strong chance that the same will happen locally. I’m not allowed to engage in political banter online, and that’s not what I’m doing. I’m saying there’s a good chance our finances are going to take a hit soon. I’ve know that a strike was a possibility for a while now, but I hoped it would be avoided. There’s still a chance that it will be, but every day unresolved is another day closer to . . . “Disaster”.

On hold

We’re trying to get Zen about it. It’s beyond our control; we just have to do what we can to be prepared. April was a fairly typical slow spring month for DH, so any debt-repayment we would have made would have been small. But we’re not paying off anything. We’re on hold. To lower expenses, we’re thinking of things like super-frugal groceries, less driving, and cutting discretionary funds. May already looks very promising in terms of DH’s business, but that just makes our delayed renovations more frustrating. He could really use the work space now.

“And so hold on when there is nothing in you / Except the Will which says to them: ‘Hold on!’” Sometimes, when we do our best, we make great progress in our journey out of debt. At other times, when we do our best, we manage to hold steady. Of course I’d rather make great progress. But patience is huge in this game. So is “Will”. Our challenge for May – and possibly beyond – will be to hold on.

Do you find it hard to stay steady with the ups and downs of personal finance? Your comments are welcome.

prudencedebtfree

You know, I still think the giant March payment was the right move. You need to have a little fun sometimes! And better to make fun an irresponsibly large debt payment than a blowout at Saks 5th Avenue 🙂

I totally understand where you are coming from since I have variable income too. Last year when I had to buy a new (used) car, I wanted to put down a huge amount as to avoid any kind of debt. My sensible friend said, “yes but I know how you hate to be cash poor and if something happens with work slowing down you’ll be SOL.” Well I listened to him and it turns out that very thing happened, and I needed that cash on hand to get me through.

He is a wise friend. So far, in almost 3 years (end of May) of debt-reduction, we have never reversed and gone back into more debt. This might end up being the first time that we do . Ugh! Where was your friend when we needed him?

We are talking about and watching our money each and every day, you just never know what the future holds. If you get lazy or put it on auto pilot you just fall further out of touch with with it. You have to strike when you have the chance. If you didn’t take the chance on the big debt repayment in March I’m sure you’d be regretting it now. Sure April may have been tough but you survived and now it’s on to a new month that in your own words looks promising. Plan for the worst, and work towards the best!

Thanks Brian. The big problem we might have to deal with in May is possible strike action for me. I kind of couched that fact in this post at first. DH also thought I didn’t make it clear enough. I’ve gone back and edited it to make it more clear. DH’s strong May might see us through if the strike happens, but if it’s prolonged, we’re in for a rough time. Still hoping for the best.

“It’s good to maintain a measured, buffered state in your personal finances” <– I love this! And it's so true. Paying off a large lump sum is great, but sometimes its good to balance everything and protect yourself financially and your peace-of-mind especially when income fluctuates. My main buffer is my emergency fund so I don't have to live paycheck to paycheck while paying off debt.

How did you get so wise so young? We’re following Dave Ramsey’s debt reduction steps, and the big emergency fund will be the next step for us after this business debt is gone. I look forward to the peace of mind and protection that come with that e-fund. I’d say it’s pretty impressive that you’ve already got one.

I have found it taxing to deal with the ups and downs of finances at times. Budgeting can be tough. The good news is that if you keep at it, even with some setbacks, I’ve found things tend to keep improving over time. We’re in a much better position than we were a few years ago. I’m also a huge fan of having an emergency fund. I’m keeping my fingers crossed that things will go smoothly for you in the coming weeks!

I’m still hoping too. We haven’t yet saved a big emergency fund, but it’s our next step, according to the Ramsey debt-reduction plan we’re following. And you’re right – things do improve over time. The debt diminishes; we develop our frugality muscles; and old habits die off. Thanks for the good wishes, Jennifer : )

Ugh, I’ve been SO guilty of counting on income that I just “knew” was going to happen but then it didn’t. I’m SLOWLY starting to learn my lesson and not count our chickens before they hatch. Hang in there, my friend. You guys got this.

It’s difficult to balance plans based on reasonable expectations with the possibility that it might not pan out – especially since it seems to be a negative way of thinking. But in the end, “Don’t count your chickens before they’re hatched” is absolutely right. Thanks for the encouragement, Laurie : )

The friend I call DFF (Debt-Free Friend) NEVER operates on auto-pilot. She’s all over everything to do with her finances – to the last detail. I don’t think I’m wired that way, but I would at least like to be on “manual” : )

My downfall is getting to specific with outcomes. Ten days ahead of time, I get convinced that we’ll have $300 leftover at the end of the month. Then something pops up, and I’m crushed that we end up with less or none at all.

This month I’ve been trying to take it easy and think, “Hey, right now we have extra. Let’s see what shows up in the meantime. Hopefully, there will be something left over.” It seems to be calming me down.

Abigail, I really appreciate the fact that you don’t shy away from those detailed points that are the building blocks of your financial reality. “Crushed” is a strong word, but I believe you are using it with complete accuracy. I have also had the experience of knowing in my mind that my response to something is overly sensitive – but that doesn’t stop me from feeling it. If you are honest, and if you know “This emotional response is not serving me well,” there is power to actually do something about it. You are living proof! I hope that you have success in meeting the ups and downs of your finances without experiencing corresponding ups and downs emotionally.